Another Update.

While we had a good month or 2, the travel and accommodation market was locked up again by Covid.This week has seen the turnaround we’ve all been waiting for in the motel industry. How quickly 20% occupancy can become 70%, and full rates.

Motel P & L’s over this  extended Covid period are very revealing and provide real life worst case scenarios rather than projections. The period also revealed the calibre of landlords and banks. Positive changes are coming for lessees as a result so watch this space.

Hope those investing complete very thorough due diligence and take advantage of the finance and legal experts on this forum who are very generous with their hard earned experience and expertise.

Cheers
thecrest

Time to update.

Unfortunately since mid March 2020 with Covid, the motel sector has suffered considerable losses. Various Govt assistance packages helped like Jobkeeper and CCoC re rent etc, but in simple terms – stop travel and you kill motels. Travel confidence was damaged by relentless heavy media doom n gloom, and border closures stopped travel altogether. Things have improved this month, almost back to normal turnover. Business confidence is low in the accommodation sector where heavy losses were experienced, but everyone is soldiering on anyway.

Covid period P & L figures can be very revealing for potential buyers, showing how a motel coped with the worst conditions the world could throw at it, and to what extent. Under normal circumstances , those what if disaster contingency figures are normally not available and only estimates at best.

Banks are slowly lending again, but better to make finance enquiries direct to the expert finance brokers on this forum.

Potential purchasers of leaseholds should be fully informed of any liabilities or deals made between the lessee & lessor that may be binding on a new owner, like amendments to the lease, deferred rent, etc.

Hope you all are recovering or prospering. Looking forward to the good times again.

Cheers

thecrest

Hi TTRTR.
You need to sort out your finances first, before you go shopping so you know what price bracket to search.
For loans – Offering assets which would be difficult to seize & sell under default conditions won’t help loan applications. Suggest you find an expert Finance Broker – there are some in this forum.
There are plenty of buyers for secure 8-9% passive income returns, so quality investment motels in good condition and location with a good tenant in place are in demand. That’s why a motel broker would help with early market information. In a fast market, you need to be prepared to move fast as well, or be prepared to miss out.
Email me for a broker’s details.

Cheers
thecrest

Hi @au43.
Welcome to the Forum. Yes it’s full of very helpful and experienced people for which I’m grateful.
$300-$400K could buy a good leasehold around $700-$800K mark at 30% ROI. Banks usually want 50% dep but check with finance brokers on this forum for current accurate info on finance. Check lenders LVR re property to see what % of your equity in your property they will lend against. Used to be 80% so if you have $400K equity they will consider $320K as a deposit. Used to be if you used residential real estate as security you could borrow at residential rates, but again, use the finance expertise of brokers on this forum who have notched up huge numbers of posts helping heaps of people on this forum, because they are awesome. A scenario could be : buying a motel leasehold with a “free” residence included, and rent out your home so you stay in the real estate market back home, and your home becomes an investment property and rent helps offset the loan. Lack of industry experience can be offset by buying something rock solid. Your CV will be taken into consideration by lenders no doubt. Also favorably considered and desirable for you as well is a (rock solid) simple motel with enduring reasons why it would continue to provide the quoted returns, which would give you time to gain experience. As an example, that could be a country motel (no restaurant) next door or across the road from a financially sound RSL or Bowling Club, in a stable and growing town not overpopulated by competitor motels, not scheduled to be bypassed,and with little likelihood of the Club building its own.
Other ways to offset lack of experience could be buying a branded motel, like Best Western or Golden Chain, and using outsourced “revenue management” and social media/ online reputation management expertise and I.T., (as we do). Unless you have expertise in any of those areas yourself.
A coastal motel would also work, income is seasonal and average annual return ROI is 3-5% lower than inland, (due to land value).
There are some motel industry trainers but not sure what they’re like.
That’s a very brief overview.
Cheers
thecrest